Professional Documents
Culture Documents
Table of
Content
Investment
Banks
.3
1. Define Investemnt Banks.................................................................................3
2. Concept of Investment Banks...........................................................................4
3. Role of Investment Banks............................................................................. 4
4. Investment Banks Services...........................................................................5
5. Other Activities of Investment Banks.................................................................6
Investment Banker..
.7
1. Functions of Investment Banker.......................................................................7
2. Qualification of Investment Banker...................................................................7
Investment Banks in
Pakistan
.8
1. Top tens Investment Bank in Pakistan................................................................8
Mortgage Markets and
Banks
. 11
1. History of Mortgage..................................................................................... 11
2. Define Mortgage.......................................................................................... 11
3. Market in Mortgage..................................................................................... 11
4. Types of Mortgage Loans..............................................................................12
Pension
Fund
..14
1. Introduction of Pension Fund.........................................................................14
2. Define Pension Funds................................................................................... 14
3. Types of Pension.......................................................................................... 15
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4. Pension Plans.............................................................................................. 15
5. Defined Benefit versus Defined Contribution pension funds.................................16
ERISA
.19
1. History of ERISA......................................................................................... 19
2. Functions of ERISA..................................................................................... 19
References
...20
Investment Banks:
An investment bank is a financial institution that assists corporations and governments
in raising capital by underwriting and acting as the agent in the issuance of securities. An
investment bank also assists companies involved in mergers and acquisitions, divestitures, etc.
Further it provides ancillary services such as market making and the trading of derivatives, fixed
income instruments, foreign exchange, commodity, and equity securities.
Unlike commercial banks and retail banks, investment banks do not take deposits.
Trading securities for cash or securities (i.e., facilitating transactions, market-making), or the
promotion of securities (i.e., underwriting, research, etc.) was referred to as the "sell side".
Dealing with the pension funds, mutual funds, hedge funds, and the investing public who
consumed the products and services of the sell-side in order to maximize their return on
investment constitutes the "buy side". Many firms have buy and sell side components.
Investment banks help companies and governments and their agencies to raise money by
issuing and selling securities in the primary market. They assist public and private corporations
in raising funds in the capital markets (both equity and debt).
Investment banks also act as intermediaries in trading for clients. Investment banks
differ from commercial banks, which take deposits and make commercial and retail loans. In
recent years, however, the lines between the two types of structures have blurred, especially as
commercial banks have offered more investment banking services.
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Investment banks may also differ from brokerages, which in general assist in the
purchase and sale of stocks, bonds, and mutual funds. However, some firms operate as both
brokerages and investment banks; this includes some of the best known financial services firms
in the world.
Definition:
An individual or institution, which acts as an underwriter or agent for corporations and
municipalities issuing securities. Most also maintain broker/dealer operations, maintain markets for
previously issued securities, and offer advisory services to investors. Investment banks also have a
large role in facilitating mergers and acquisitions, private equity placements and corporate
restructuring. Unlike traditional banks, investment banks do not accept deposits from and provide loans
to individuals. Also called investment banker.
from those who have them (the investors), to those who need to make use of them for producing
GDP (the issuers). Over the decades, investment banks have always suited the needs of the
finance community and thus become one of the most vibrant and exciting segment of financial
services.
Globally investment banks handle significant fund-based business of their own in the
capital market along with their non-fund service portfolio which is offered to the clients. All
these activities are broadly segmented across three platforms - equity market activity, debt
market activity and merger and acquisitions (M&A) activity.
Raising Capital:
An investment bank can assist a firm in raising funds to achieve a variety of
objectives, such as to acquire another company, reduce its debt load, expand existing operations,
or for specific project financing. Capital can include some combination of debt, common equity,
preferred equity, and hybrid securities such as convertible debt or debt with warrants. Although
many people associate raising capital with public stock offerings, a great deal of capital is
actually raised through private placements with institutions, specialized investment funds, and
private individuals. The investment bank will work with the client to structure the transaction to
meet specific objectives while being attractive to investors.
venture. In each case, the investment bank should provide a thorough analysis of the entity
bought or sold, as well as a valuation range and recommended structure.
Other activities
While advising companies and helping them raise money is an important part of what Wall Street
firms do, most perform a number of other functions as well. In fact, most major banks are highly
diversified in terms of the services they offer. Some of their other income sources include:
Research:
Larger investment banks have large teams that gather information about companies and
offer recommendations on whether to buy or sell their stock. They may use these reports
internally but can also generate revenue by selling them to hedge funds and mutual fund
managers.
Asset Management:
The likes of J.P. Morgan and Goldman Sachs manage huge portfolios for pension funds,
foundations and insurance companies through their asset management department. Their
experts help select the right mix of stocks, debt instruments, real estate trusts and other
investment vehicles to achieve their clients unique goals.
Wealth Management:
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Some of the same banks that perform investment banking functions for Fortune 500
businesses also cater to everyday investors. Through a team of financial advisors, they
help individuals and families save for retirement and other long-term needs.
Securitized Products:
These days, companies often pool financial assets from mortgages to credit card
receivables and sell them off to investors as a fixed-income product. An investment
bank will recommend opportunities to securitize income streams, assemble the assets
and market them to institutional investors.
Investment Bankers:
Investment bankers are regarded as those persons who generally give consultation to
their valued clients in order to sort out any of their high level issues that may have taken place in
their financial organization.
clients
They also help the clients to develop their financial policies and also apply them.
Since all the works are time consuming investment bankers also work for prolong hours.
Investment bankers also emerge new innovative ideas and schemes for developing
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customers.
After this comes the requirement of MBA degree holder investment banker.
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3. HSBC Pakistan:
HSBC is accepted as an active investment banking players in Pakistan. With its aim to promote
the capital HSBC investment banking in Pakistan focuses on the transaction in the area of project
and the financing of exports. Although the idea has been recently established however its
performance has been impressive even though it operated in the short run. The uniqueness of the
institution is that most of the transactions are operated cross the border due to which there is high
competency.
4. KASB Bank:
KASB Bank also operates at its best in providing its services as investment banking. The group
concerned with investment banking serves as a trusted adviser to premier clients, which helps in
developing and achieving their strategic objectives and it helps them to achieve financial needs.
This bank provides its services in the following ways, merger and acquisitions, privatization,
corporate restructuring, project finance, debt servicing and many more.
6. JS Bank:
JS bank investment banking group has been the pioneer of land mark transactions to the
domestic capital markets. It provides the following services, corporate finance advisory,
arrangement and placement of securities, trust and security services, underwriting, and bankers
to the issue.
With due efficiency the bank provides market leading investment banking services.
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7. Citi Bank:
The citi bank is also one of the best investment banks in Pakistan; it has been recognized as the
best arranger of the loans. In January it was awarded as the Bank of the Year where as in 1998 it
won another award and it was awarded as the best arranger of the loans by Euro week.
8. Meezan Bank:
Keeping in view the diversified needs of the customers Meezan Bank has a specialized
department which specifically focuses on the investment banking services. This department
gives the specific attention towards the financial solutions through diverse products which offers
financing solutions to the banks clients.
9. UBL
UBL Investment Banking Group which was established in 2002 is one of the most experiences
banking group in the field of investment banking and it is one of the largest banking group. The
specific attributes of the UBL is that it is consist of a specialist team of 19 investment bankers,
who have a very standard academic records and they have also experience in Pakistan as well as
in UAE.
10. Al Baraka:
Al Baraka bank has a vision for unrivalled services which are according to Islamic principles of
banking and this bank is dedicated to banking industry in Pakistan. The banking services include
investment banking and its team actively helps its clients providing financing needs which helps
the clients developing strategic objectives. Since this bank helps according to Islamic Shariah
therefore it is one of the reliable banks for many of its clients.
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Define Mortgage:
Secondary market:
where mortgages are resold. Mortgages in this market are often grouped together into tranches
based on risk, size, and structure and are then sold as a collateralized debt obligation, mortgagebacked security, or other type of derivative.
FHA Loans:
Federal Housing Administration (FHA). mortgage loan types are insured by the
government through mortgage insurance that is funded into the loan. First-time home buyers are
ideal candidates for an FHA loan because the down payment requirements are minimal
and FICO scores do not matter.
VA Loans:
This type of government loan is available to veterans who have served in the U.S. Armed
Services and, in certain cases, to spouses of deceased veterans. The requirements vary depending
on the year of service and whether the discharge was honorable or dishonorable. The main
benefit to a VA loan is the borrower does not need a down payment. The loan is guaranteed by
the Department of Veteran Affairs, but funded by a conventional lender.
Calling a mortgage loan type an "interest-only mortgage is a bit misleading because these loans
are not really interest only, meaning the borrower pays only interest on the loan. Interest-only
loans contain an option to make an interest-only payment. The option is available only for a
certain period of time. However, some junior mortgages are indeed interest only and require
a balloon payment, consisting of the original loan balance at maturity.
These types of mortgage loans are used when a seller has put a home on the market -- but it has
not yet sold -- and the seller wants to borrow equity to buy another home. The seller's existing
home is used as security for a bridge (also called swing) loan.
Reverse Mortgages:
Reverse mortgage are available to any person over the age of 62 who has enough equity. Instead
of making monthly payments to the lender, the lender makes monthly payments to the borrower
for as long as the borrower resides in the home. The interest rate can be fixed or adjustable. Get
independent advice from a trusted advisor before taking out a reverse mortgage.
Pension Fund
Introduction:
Pension funds are pooled contributions from pension plans set up by employers and other
organizations to provide for the employees retirement benefits. Pension funds are large
investment blocks in most economies and a major factor in the stock market. These funds are
managed by professional fund managers and fall under the institutional investor category.
Pension funds are exempt from capital gains tax, and earnings from their investment portfolio are
tax exempted.
Pension funds are in the national public interest and the legislative language explicitly defines
such funds in various laws. Pension funds perform important economic functions, such as
mobilizing and managing savings, providing income stability, making labor markets more
efficient and providing exposure to systemic risk in the financial markets.
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Definition: A pension plan is an asset pool that accumulates over an individuals working
years and is paid out during the nonworking years.
Cash: This means money saved for deposit either in a bank or financial institution.
Bonds: These are either government or private loans that pay a rate of interest until the
loan is repaid.
Types of Pensions
The pension fund industry comprises two distinct sectors.
1. Private pension funds: are those funds administered by a private corporation (e.g.
(insurance company, mutual fund).
Any pension plan set up by employers, groups, or individuals.
2. Public pension funds: are those funds administered by a federal, state, or local
government (e.g., Social Security).
Any pension plan set up by a government body for the general public.
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Pension Plan
Document that governs the operations of a pension fund.
1. Insured pension fund: A pension fund administered by a life insurance company.
The assets purchased with the premiums from the Insurance Company.
The assets purchased from the noninsured pension funds are the legal
property of the sponsoring corporation.
Noninsured pension funds generally offer the potential for higher rates of
return but are also more risky than insured pension funds.
Fully funded
Underfunded
Overfunded
$2000 x 20 = $40,000
$2000 x 25 = $ 50,000
$2000 x 30 = $ 60,000
Pension fund that pays retirement benefits based on the employees average salary over
the entire period of employment.
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Retirement Benefit
1. Retire Now
$ 48000
2. Retire in 5 years
$ 50000
3. Retire in 10 years
$ 52,000
$75,000
Retirement Benefit
$75,000 x .025 x 20 = $37500
$ 80,000
Retire in 10 years
$ 85,000
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History of ERISA:
The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets
of millions of Americans so that funds placed in retirement plans during their working lives will
be there when they retire.
ERISA is a federal law that sets minimum standards for pension plans in private industry. For
example, if an employer maintains a pension plan, ERISA specifies when an employee must be
allowed to become a participant, how long they have to work before they have a no forfeitable
interest in their pension, how long a participant can be away from their job before it might affect
their benefit, and whether their spouse has a right to part of their pension in the event of their
death. Most of the provisions of ERISA are effective for plan years beginning on or after
January,1975.
ERISA does not require any employer to establish a pension plan. It only requires that
those who establish plans must meet certain minimum standards. The law generally does not
specify how much money a participant must be paid as a benefit.
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Sets minimum standards for participation, vesting, benefit accrual and funding. The law
defines how long a person may be required to work before becoming eligible to participate in
a plan, to accumulate benefits and to have a non-forfeitable right to those benefits. The law
also establishes detailed funding rules that require plan sponsors to provide adequate funding
for the plan.
Requires accountability of plan fiduciaries. ERISA generally defines a fiduciary as anyone
who exercises discretionary authority or control over a plan's management or assets,
including anyone who provides investment advice to the plan. Fiduciaries who do not follow
the principles of conduct may be held responsible for restoring losses to the plan.
Gives participants the right to sue for benefits and breaches of fiduciary duty.
Guarantees payment of certain benefits if a defined plan is terminated through a federally
chartered corporation, known as the Pension Benefit Guaranty Corporation.
Protects the plan from mismanagement and misuse of assets through its fiduciary provisions.
References:
www.scribd.com
www.investopida.com
www.slideshare.com
www.wikipida.com
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